TMI Tax Updates - e-Newsletter
July 17, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

TMI SMS

• Liquidation of the Corporate Debtor - removal of goods lying in Customs Bonded Warehouse without any condition/ Duty - Permission granted

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Articles

• Goa Authority for Advance Ruling - Springfield (India) Distilleries dated 29.06.2020
• Contents of Latest Paperless Shipping Bill by Kishan Barai
• CODE ON WAGES (CENTRAL) RULES, 2020 – DRAFT

News

• Tele-conversation held between Commerce and Industry Minister Shri Piyush Goyal and the U.S. Secretary of Commerce Mr Wilbur Ross

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• Exchange Notification No. 59/2020 - Customs (N.T.)

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Notifications

Customs

• 59/2020 - dated 16-7-2020 - Cus (NT)
  Exchange Rates Notification No.59/2020-Custom (NT) dated 16.07.2020.

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• 58/2020 - dated 16-7-2020 - Cus (NT)
  Appointment of CAA in case of in case of M/s Sony India Private Limited

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• 57/2020 - dated 15-7-2020 - Cus (NT)
  Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Silver-

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DGFT

• 19/2015-2020 - dated 15-7-2020 - FTP
  Amendment in import policy and policy conditions of items under Chapter 84 of ITC (HS), 2017, Schedule – I (Import Policy)

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GST - States

• 72/2019- State Tax - dated 16-7-2020 - Delhi SGST
  Seeks to notify the class of registered person required to issue invoice having QR Code

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• 38/1/2017-Fin(R&C)(158) - dated 10-7-2020 - Goa SGST
  Amendment in Notification No. 38/1//2017-Fin(R&C)(87), dated 31st December, 2018

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• 38/1/2017-Fin(R&C)(157) - dated 10-7-2020 - Goa SGST
  Amendment in Notification No. 38/1/2017-Fin(R&C)(8), dated the 30th June, 2017

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• 38/1/2017-Fin(R&C)(156) - dated 10-7-2020 - Goa SGST
  Goa Goods and Services Tax (Seventh Amendment) Rules, 2020.

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• 19365 - FIN-CT1-TAX-0002/2020 - dated 30-6-2020 - Orissa SGST
  Odisha Goods and Services Tax (Seventh Amendment) Rules, 2020.

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• GO. (MS) No. 106 - dated 2-7-2020 - Tamil Nadu SGST
  Tamil Nadu Goods and Services Tax (Eighth Amendment) Rules, 2020.

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• GO. (MS) No. 105 - dated 2-7-2020 - Tamil Nadu SGST
  FORM GSTR-3B - Waiver of late fee payable under section 47 of Tamil Nadu Goods and Services Tax Act, 2017

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• GO. (MS) No. 104 - dated 30-6-2020 - Tamil Nadu SGST
  Seeks to further extend period to pass order under sub-section (7) of section 54 of Tamil Nadu Goods and Services Tax Act, 2017

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• GO. (MS) No. 103 - dated 30-6-2020 - Tamil Nadu SGST
  Seeks to extend due date of compliance which falls during the period from '20.03.2020 to 20.08.2020' till 31.08.2020

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• GO. (MS) No. 98 - dated 26-6-2020 - Tamil Nadu SGST
  Tamil Nadu Goods and Services Tax (Seventh Amendment) Rules, 2020.

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• GO. (MS) No. 97 - dated 23-6-2020 - Tamil Nadu SGST
  Tamil Nadu Goods and Services Tax (Sixth Amendment) Rules, 2020.

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• GO. (MS) No. 90 - dated 9-6-2020 - Tamil Nadu SGST
  To give effect to the provisions of Rule 67A for furnishing a NIL return in FORM GSTR-3B by SMS

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Income Tax

• 48/2020 - dated 14-7-2020 - IT
  U/s 138 (1) of IT Act 1961 Central Government specifies Additional Secretary and Development Commissioner, Ministry of Micro Small and Medium Enterprises

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Circulars / Instructions / Orders

DGFT

• 13/(2015-2020) - dated 15-7-2020
  Procedure for allocation of import authorization of Power tillers

Highlights / Catch Notes

GST

• Classification of Services - rate of tax - applicant agreed for construction work namely “Construction of Building for Office space/IT space at IT park, Mangalgiri as awarded by APIIC - the applicant did not provide any information or documentary proof evidencing that the construction/ building is for use other than for commerce, industry, or any other business or profession to be eligible for concessional rate of 12%.
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• Governmental Authority/entity or not - APIIC which awarded construction work to the applicant - the Government of Andhra Pradesh including its nominees is having 100% of share holding and thus it is covered under the definition of 'Government Entity' under the above said provisions. - M/s APIIC is a “Government Entity” for the purpose of GST matters.
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• Liability of GST - medicines supplied to In-patients through pharmacy - the food supplied to in-patients is part of composite supply of health care and not separately taxable, whereas other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable - the same principle is applicable to the medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure.
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• Rate of GST - Pure service or not - the services provided by the Contractor are pure services of “Operation and Maintenance” of plant devoid of any supply of material or goods in the due process. The services under question fall under Heading 9987 “Maintenance repair and installation (except construction) Services” attracting tax rate of 18%.
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• Governmental Authority or not - The Board of the applicant i.e., “Sri Satya Sai Water Supply Project Board” consists of 9 Members, out of which 7 are officers /Employees of the Government of Andhra Pradesh that qualifies for 77% of Government control falling short of the designated 90% as required by the Act. Even the cost of the operation and maintenance of the water supply scheme is contributed at a ratio of 70% by the State Government, while 30% of the cost is being borne by the applicant from the water charges collected from the users - In the instant case the applicant falls short of the qualifying mark of 90% in terms of equity or control. Hence the applicant does not fit in the category of “Governmental authority”.
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• Classification of services - Rate of GST - Works Contract Service - construction service - As the purpose of the construction / building is meant for accommodating Small and Medium Enterprises (SMEs) and Startups, which are not other than for commerce, industry, or any other business or profession, the concessional rate of 12% is not available to the applicant.
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• Rate of GST - tobacco leaves - the leaves as long as they do not loose their basic character as 'leaves', shall be considered as tobacco leaves only - Rate of GST on tobacco leaves (butted or re-dried) is 5% - Rate of GST will be 28% if the applicant gets the tobacco leaves threshed and re-dried.
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Income Tax

• Estimation of commission income on accommodation entries - while deciding identical issue in assessee’s own case, the Tribunal, has upheld estimation of commission income @ 1% of the total turnover - Matter restored before CIT(A) for fresh decision.
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• Revision u/s 263 - It is evident from the above that the Commissioner is not empowered to exercise his jurisdiction on an issue which is subject matter of appeal before the CIT(A).
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• Disallowance of various expenses on ad hoc basis - While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for adhoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained.
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• Reopening of assessment - information received from INV Wing - Documents and evidences have not been examined by the Assessing Officer and had he examined these documents/evidences or made necessary enquiries, he may not have issued notice u/s 148 of the Act but for non-application of mind, the assessment was reopened.
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• Correct head of income - The Tribunal thereafter on the basis of meticulous appreciation of evidence on record has recorded a finding that assessee has rightly disclosed the income from the property as long term capital gains instead of business income. The aforesaid finding by no stretch of imagination can be believed to either perverse and arbitrary.
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• Stay petition - commanding the petitioner to pay 20% of the demanded amount - CIT(A) cannot blindly apply the Circular, as in the instant case. - Even the order do not reflect whether opportunity of hearing was given to the petitioner nor any advertance to any arguments.
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Customs

• Rejection of Refund Claim - denial of refund on the ground that the assessment of Bill of Entry has not been challenged by the appellant by filing appeal before appropriate forum - Whenever an assessee pays duty under protest, it indicates a challenge by him on the demand of duty made by the department. Therefore it is for the department to pass appropriate assessment order considering the protest made by the assessee.
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IBC

• Liquidation of the Corporate Debtor - Waterfall Mechanism of section 53 - seeking to remove goods lying in Customs Bonded Warehouse without any condition, demur and/or payment of Customs Duty - section 238A read with section 53 of the Insolvency and Bankruptcy Code, 2016 - Permission granted.
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Service Tax

• Principles of Natural Justice - Whether the Tribunal should permit the appellant to adduce documents/evidence in support of its plea that the activity carried out by the appellant would fall under the category of ‘works contract’, which was not leviable to service tax before 01 June, 2007? - Permission granted.
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• Demand of Service Tax - Franchise Service - In this case both the franchisee taking over the liability of debt of the franchisor and paying an amount by way of shares has been quantified in terms of money and that is how the SCN has computed the demand. There is no doubt that the entire amount has been paid only for consideration of this service. There is no other arrangement in this case. Therefore, the case is against the appellant on merits.
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Case Laws:

• GST

• 2020 (7) TMI 381
  Classification of Services - rate of tax - applicant agreed for construction work namely Construction of Building for Office space/IT space at IT park, Mangalgiri as awarded by APIIC - composite supply of works contract - Governmental Authority/entity or not - construction work taken up by the applicant is meant for business or otherwise. Whether APIIC which awarded construction work to the applicant would qualify for a Governmental Authority/entity or not? - HELD THAT:- Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by the GO No: 831 dated 10-SEP-1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41st Annual Reports for the years 2013-14 as made available by APIIC website, the Government of Andhra Pradesh including its nominees is having 100% of share holding and thus it is covered under the definition of 'Government Entity' under the above said provisions. Therefore, we conclude that M/s APIIC is a Government Entity for the purpose of GST matters. Whether the construction work in which the applicant is engaged in is meant for any business or otherwise? - HELD THAT:- As seen from the 41st Annual Report for the year 2013-14 as made available by APIIC in their website https://www.apiic.in/Annualreports.html , they are engaged in land acquisition and development and allotment of plots and sheds to various industrial ventures in the State making investments in joint venture, in associate companies , in related party companies, in subsidiary companies etc., and the income they are getting is revenue from operations like sale of land, houses, interest on hire purchase and long term borrowings etc. - It is evident from the above statement that the activities of M/s APIIC are business activities and not otherwise. Moreover, the applicant did not provide any information or documentary proof evidencing that the construction/ building is for use other than for commerce, industry, or any other business or profession to be eligible for concessional rate of 12% available under Notification No.24/2017 - CT (Rate) dated 21.09.2017. The contract entered by the applicant is classifiable under SAC Heading No. 9954 under construction services, and it falls under entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18%.

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• 2020 (7) TMI 380
  Liability of GST - medicines supplied to In-patients through pharmacy - medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure - HELD THAT:- Applicant renders health care services to in-patients in the form of supply of medicines, drugs, stents, implants etc being administered during the medical treatment or procedure - Primarily the health care services provided by the applicant are exempt under Sl.No. 74 Heading 9993 vide Notification No 12/2017 - Central Tax (Rate) Date: 28.06.2017. The health care services as explained in (zg) of para 2 of Notification no. 12/2017 - Central Tax (Rate) Date: 28.06.2017, defines service by way of diagnosis, or treatment or care for illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India. In common parlance, when one looks into the definition, 'the treatment or care' extended by hospital can be thought of devoid of medicines, relevant consumable, or implants, by no stretch of imagination. The supply of medicines and the consumables are integral part of the treatment extended to the in-patients by the hospital - the services rendered by the applicant is a composite supply as defined under section 2(30) of CGST Act, 2017 in which the principal supply is health care, being predominant and the supply of medicines, drugs, implants, stents, and other consumables, come under ancillary supplies and accordingly tax liability has to be determined under section 8 of CGST Act, 2017. Even the Circular No.32/06/2018-GST (F.No.354/17/2018-TRU) date: 12.02.2018 released on the approval of the CGST council 25th meeting clarifies the issue on the similar lines stating that the food supplied to in-patients is part of composite supply of health care and not separately taxable, whereas other supplies of food by a hospital to patients (not admitted) or their attendants or visitors are taxable - the same principle is applicable to the medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure. Thus, the supply of medicines supplied to In-patients through pharmacy are not liable to tax, being a part of the composite supply of health care services under SI.No. 74 Heading 9993 vide Notification No 12/2017 - Central Tax(Rate) Date: 28.06.2017 which are nil rated - medicines, drugs, stents, implants etc administered to in-patients during the medical treatment or procedure are not liable to tax.

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• 2020 (7) TMI 379
  Governmental Authority or not - undertaking drinking water supply projects in Anantapur District, Andhra Pradesh - exemption from the GST by virtue of Entry 3 in Notification 12/2017 (Rate), dt: 28.06.2017 - requirement of remission of GST to its suppliers for any services it procures by virtue of its activities of supplying water for domestic purposes. Governmental Authority or not - HELD THAT:- The applicant is not set up by an Act of Parliament or a State Legislature - applicant is constituted by the Government i.e., the State of Andhra Pradesh under G.O. Ms No. 344 dated: 16.09.1997 - The Board of the applicant i.e., Sri Satya Sai Water Supply Project Board consists of 9 Members, out of which 7 are officers /Employees of the Government of Andhra Pradesh that qualifies for 77% of Government control falling short of the designated 90% as required by the Act. Even the cost of the operation and maintenance of the water supply scheme is contributed at a ratio of 70% by the State Government, while 30% of the cost is being borne by the applicant from the water charges collected from the users - In the instant case the applicant falls short of the qualifying mark of 90% in terms of equity or control. Hence the applicant does not fit in the category of Governmental authority . Thus availment of exemption for the services received by the applicant by virtue of SI.No. 3 of Notification No 12/2017 - Central Tax (Rate), dt: 28.06.2017 does not arise in this context. Taxability of the services procured by the applicant from its Contractor M/s. Larsen Toubro Limited, Water Supply Distribution Business Unit, Water Effluent Treatment IC - HELD THAT:- The Contractor is responsible for the Operation and Maintenance of the plant such as engaging of labour, supervisors to oversee the labour and managers for overall supervision along with amenities, tools tackles provided for all the above personnel like vehicle, office establishment etc., while the applicant would ensure uninterrupted power supply and supply of material /spares as and when necessitated by the Contractor. Thus the services provided by the Contractor are pure services of Operation and Maintenance of plant devoid of any supply of material or goods in the due process. The services under question fall under SI.No. 25, Heading 9987 Maintenance repair and installation (except construction) Services attracting tax rate of 18% under Notification 11/2017- Central Tax (Rate) dt: 28.06.2017.

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• 2020 (7) TMI 378
  Classification of supply - supply of goods or not - transaction of printing of content provided by the customer, on poly Vinyl Chloride banners and supply of such printed trade advertisement material - classification of such trade advertisement material if the transaction is a supply of goods - Applicability of TRU Circular No. 11/11/2017-GST dated 20.10.2017. Whether the transaction of printing of content provided by the customer, on poly Vinyl Chloride banners and supply of such printed trade advertisement material is supply of goods? - HELD THAT:- The applicant in the instant case takes up the supply of trade advertising material by procuring the required raw materials such as poly vinyl, flex, paper, cloth printing inks etc., all by themselves based on specification provided by the client in terms of design, size and material. In-fact, the applicant transfers the title in the goods i.e., printed material on flex to the customer - From the plain reading of Section 7 of CGST Act, 2017 read with Schedule - II Sl.No. 1(a) of CGST Act, 2017, it is obvious that the applicant is transferring the title in goods to his customers in the form of trade advertising material and it constitutes supply of goods only. Rate of tax - Classification of goods - HELD THAT:- The trade advertising materials is classifiable vide Notification No.1/2017 - Central Tax (Rate) dt: 28.06.2017 under S1.No.132 under HSN code 4911 and attracts tax rate of 12% - Further, the same has been clarified in detail vide the clarification issued under F.No.354/263/2017-TRU, Dt: 20th October, 2017 in Circular No.11/11/2017-GST.

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• 2020 (7) TMI 377
  Classification of services - Rate of GST - Works Contract Service - construction of Millennium tower at Madhurawada, Visakhapatnam for information Technology and Communication Department, Government of Andhra Pradesh and through Nodal Agency APIIC - whether refund to be submitted in RFD-01? - Government Entity or otherwise. Whether M/s. APIIC is a Government Authority / Entity or otherwise? - HELD THAT:- Andhra Pradesh Industrial Infrastructure Corporation Ltd. (APIIC) was formed in 1973 by the GO No: 831 dated lo-SEP-1973 issued by Government of Andhra Pradesh. As seen from the share holding ratios of the 41 st Annual Reports for the years 2013-14 as made available by APIIC website, the Government of Andhra Pradesh including its nominees is having 100% of share holding and thus it is covered under the definition of 'Government Entity' under the above said provisions. Therefore, M/s APIIC is a Government Entity for the purpose of GST matters. Classification of Service and rate of tax - HELD THAT:- As seen from the Agreement, the applicant agreed for construction of Millennium tower at Madhurawada, Visakhapatnam for information Technology and Communication Department, Government of Andhra Pradesh and through Nodal Agency APIIC, which includes procurement and supply of goods and services, for agreed consideration. The activity of construction includes both supply of goods and also services - The composite supply of works contract under Section 2 (119) of CGST Act, 2017 / APGST Act, 2017 is treated as supply of service in terms of Serial No.6 (a) of Schedule II of CGST Act '2017 / APGST Act, 2017 - The Government of India, vide notification No. 11/2017 - Central Tax (Rate), dated -28th June 2017 notified the rate of GST applicable on supply of services. Under this notification for heading 9954 the applicable rate of GST is 9%. The applicant is engaged in Construction work for Millennium Tower at Plot No.16 17 (in 4.00 Acres) at Hill No.3. Madhurawada, Visakhapatnam District through Nodal agency APIIC, which is meant for undertaking development of EMC's/IT Parks/IT SEZs/ IT Layouts, for coordinating with necessary Government agencies and provide basic infrastructure like power, water, sewerage, access roads to the doorsteps of the proposed EMCs/IT Parks/ IT SEZs/ IT Campuses. APIIC has also been nominated as Industrial Area Local Authority (IALA) in Madhurawada IT layout for undertaking provision maintenance of Infrastructure facilities. Whether the construction work in which the applicant is engaged in is meant for any business or otherwise? - HELD THAT:- The activities of M/s AMC are business activities and not otherwise. The applicant informed that the said construction is for accommodating Small and Medium Enterprises (SMEs) and Startups. Moreover, the applicant did not provide any information or documentary proof evidencing that the construction/ building is for use other than for commerce, industry, or any other business or profession to be eligible for concessional rate of 12% (6% CGST + 6% SGST) available under Notification No.24/2017 - CT (Rate) dated 21.09.2017. The contract entered by the applicant is classifiable under SAC heading No. 9954 under construction services, and it falls under entry no (ii) of serial No.3 of notification no. 11/2017 Central Tax (Rate) dated 28.06.2017 i.e., Composite Supply of Works Contract as defined in clause 119 of Section 2 of Central Goods and Services Act, 2017 and the applicable rate of tax is 18%.

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• 2020 (7) TMI 376
  Rate of GST - tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves - purchase of tobacco leaves form other dealers who have purchased them from farmers, for the purpose of trading - seggregation of tobacco into grades depending upon their size (width), colour /shade, length, texture of the leaf etc., and sells such graded tobacco leaf - tobacco leaves are butted and sold to other dealers - tobacco leaves re-dried without getting them threshed and sold - tobacco leaves threshed and re-dried - tobacco threshed and re-dried on job work basis at others' premises and then sells such threshed and re-dried tobacco leaves to others. HELD THAT:- The transactions of tobacco from auction platform to the supply made to the exporter are to be interpreted in the light of the relevant notifications and to decide the rate of tax accordingly. As seen from the different stages of commodity i.e., from the leaves stage to the final product (manufactured tobacco), the green leaf plucked from the plant undergoes different types of curing to reduce the level of moisture to the maximum extent for sustainability and to continue as leaf for further process. The tobacco leaf will be entitled as a commercial commodity only drying (Curing) and normally put to trade in form of bundles. The same will be traded between the farmer and the trader and trader to trader/manufacturer and so on. As envisaged from the entries under GST, there are four different entries for tobacco, one under Schedule-I. Liable @5% (CGST 2.5% and SGST 2.5%) and the remaining heads are in Schedule- IV liable 28% - And there is an entry of tobacco leaves under Reverse charge mechanism also. The commodity tobacco leaves shall be interpreted in the light of the entry 109, Schedule- I of Notification No.1/2017-Central Tax (Rate) and the entry no 3 inserted under the notification 4/2017-CGST (Rate) issued for liability under reverse charge mechanism and the relevant HSN code mentioned against the description of the commodity i.e., 2401. As observed from the facts, i.e process of tobacco, from the field to final product, the green leaves undergo curing process, and become eligible commercial commodity, for which the transaction takes place in between the farmer and the trader on the auction platform. Further, as per the clarification issued by The Department TRU(Tax Research Unit)vide circular F.No.322/2/2017/Dec.2017, Tobacco Leaves means, leaves of tobacco as such or broken leaves or Tobacco Leaves stems . It clearly expresses that the leaves as long as they do not loose their basic character as 'leaves', shall be considered as tobacco leaves only - In the present case the applicant purchases the dried leaves on auction platform and trades the same to other dealers or exporters and further engaged in threshing and re-drying of tobacco leaves on job work basis for other traders or manufacturers. Rate of GST on tobacco leaves (butted or re-dried) is 5% - Rate of GST will be 28% if the applicant gets the tobacco leaves threshed and re-dried.

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• 2020 (7) TMI 375
  Constitutional validity of Section 16(2)(C) of the CGST Act, 2017 and Rule 86A of the CGST Rules, 2017 - ITC credit blocked - supplier/seller does deposit the tax collected from the purchaser, over which the bonafide purchaser has no control - HELD THAT:- List on 14.07.2020 for interim directions.

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• Income Tax

• 2020 (7) TMI 374
  Stay petition - commanding the petitioner to pay 20% of the demanded amount - HELD THAT:- AO / CIT(A) cannot blindly apply the Circular, as in the instant case. - Even the order do not reflect whether opportunity of hearing was given to the petitioner nor any advertance to any arguments. Such order cannot escape the scrutiny of the Court, while exercising the power of judicial review under Article 226 of the Constitution of India. Ext.P14 impugned order is set aside and the matter is remitted to the Office of the Commissioner of Income-tax (Appeals) - I, to consider the stay applications filed and pass detailed order, after affording opportunity of hearing to the petitioner.

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• 2020 (7) TMI 373
  Correct head of income - Determination of income from the property - business income or long term capital gain - substantial question of law - HELD THAT:- Admittedly, the properties were acquired by the assessee in the year 1992 and assessee had entered into an agreement for sale on 13-5-2002. Thereafter in the accounts up to the year 2004, the property was mentioned as an asset. Assessee has not conducted any other activity other than holding the land as investment. It is also pertinent to mention here that the revenue has not come up with any documentary evidence to suggest that assessee had earned income from the transaction to the land in question during the year 2003-04. The Tribunal thereafter on the basis of meticulous appreciation of evidence on record has recorded a finding that assessee has rightly disclosed the income from the property as long term capital gains instead of business income. The aforesaid finding by no stretch of imagination can be believed to either perverse and arbitrary. - Decided against revenue

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• 2020 (7) TMI 372
  Reopening of assessment - information received from INV Wing - bogus sales and commission paid on the alleged accommodation entries - application of mind of the Assessing Officer before issuing such notice or not? - HELD THAT:- Entire assessment based upon the information received is devoid of any application of mind. At this juncture, it is pertinent to mention that neither Shri Kishore Sharan Goyal nor Sai Kripa Enterprises and Balaji Enterprises are related to the assessee. Transaction is not of unsecured loan/cash credits where the assessee has introduced its own unaccounted cash in the form of sales. Sales are supported by C Forms, VAT Nos and Sales Tax numbers of the parties, further supported by the certificates from the forest department. All these have not been examined by the Assessing Officer and had he examined these documents/evidences or made necessary enquiries, he may not have issued notice u/s 148 of the Act but for non-application of mind, the assessment was reopened. In the case of RMG Polyvinyl Ltd [ 2017 (7) TMI 371 - DELHI HIGH COURT] had the occasion to consider the issue whether notice issued by the Assessing Officer to reopen assessment on the basis of information received from INV Wing could be said to be tangible material, the Hon'ble High Court held that information received from INV Wing could not be said to be tangible material per se without a further enquiry being undertaken by the Assessing Officer to establish link between tangible material and formation of reason to believe that income has escaped assessment. Thus the assessee succeeds on both the counts - reopening is devoid of any application of mind and additions are solely based upon assumptions, conjectures and surmises. - Decided in favour of assessee.

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• 2020 (7) TMI 371
  Deduction u/s 80P - claim denied as assessee was essentially doing the business of banking and disbursement of agricultural loans by the assessee was only minuscule - whether loan is a agricultural loan or a non-agricultural loan? - HELD THAT:- The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In these cases, such a detailed examination has not been conducted by the A.O. A.O. has not examined to what extent loans, if any, has been disbursed to non-members. There is a passing statement in the assessment order that there have been disbursement of loans to non-members as well. In the light of the dictum laid down by the Full Bench of the Hon ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. A.O. shall list out the instances where loans have disbursed to non-members of assessee-societies, for non-agricultural purposes etc. and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2) - Appeal filed by the assessee is allowed for statistical purposes.

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• 2020 (7) TMI 370
  Addition u/s 40(a)(ia) - Selection of AY - HELD THAT:- This ground raised by the Revenue does not relate to assessment year 2008-09. Ld. Counsel for the assessee informs the Bench that this ground relates to assessment year 2007-08. We have examined the assessment order and order of ld. CIT(A) and noted that there is no any discussion about addition u/s 40(a)(ia) therefore, this ground does not relate to A.Y. 2008-09, hence we dismiss ground No. 1 raised by the Revenue. Addition claimed under the head rebate and claim - Since the customers have deducted the amount while releasing the payment, hence all such deductions have been provided in the books of account of the company as expenses under the head rebate and claim. - HELD THAT:- the Ld. A.O. has erred in disallowing the ascertained sales liability of ₹ 78,00,190/-supported by proper vouchers and details of such liability. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground of appeal raised by the revenue is dismissed. Contribution to club, Other staff welfare Exp. and Other workers` welfare expenses - HELD THAT:- AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for adhoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained. Therefore, we delete the following adhoc expenses sustained by the ld CIT(A) on Contribution to club, Other staff welfare and other workers` welfare expenses . Addition on account books and periodicals - HELD THAT:- ld CIT(A) has sustained the addition @10% of subscription expenses on adhoc basis of ₹ 1,34,909/-. We nota that in assessee`s case under consideration the assessment is made by AO under section 143(3) of the Act and books of accounts of the assessee were not rejected by the assessing officer. We have already taken a view in para No.18 of this order that ad hoc disallowance should not be done by AO therefore we delete the adhoc addition sustained by CIT(A).Hence, we dismiss the appeals of Revenue and allow the cross objections filed by the assessee. Addition on account of Gardening Expenses - HELD THAT:- The company is also an ISO 9000/OHSAS 18001 certified company which requires neat and green environmental around the factory premises and therefore, the company maintains garden, do plantation etc in the company premises for smooth and healthy environment at the work place. Regarding expenses under the head gift to others , the ld Counsel has argued before the Bench that the gift given on account of marriages of contract workmen sons and daughter. The Entertainment expenses has incurred on customers, supplier and other business associates who visits to factory premises and take snacks, food etc. in the guest house. Regarding contribution to education and health and occupational health care expenses the ld counsel has argued that factory place is naxal affected place and no provision of medical health care and schooling of children of the employees and for this purpose the company incurs expenses under this head.Regarding guest house expensesthe assessee has argued that company is located in very remote area and fooding and lodging facilities are not available within 30 kms. of its facory, therefore, company operates a guest house for its business associates who may stay and take food. We delete the following adhoc disallowances sustained by the ld CIT(A) Gift to others, Entertainment Expenses, Contribution for education and health care expenses,Guest House expenses AND Community welfare expenses. Deduction u/s 80-IA for its unit for a captive power plant - addition made on allocation of expenses to Power plant unit - HELD THAT:- As argued that the company maintains separate books of accounts for 80-IA plant and other plants and all the expenses related to concerned plant are booked appropriately in the books of the same plant and these books of accounts are audited by the Statutory Auditors and certified by the management of company. It has also been argued that the apportionments of certain expenses made by the learned A.O. between 80-IA and other plants is totally baseless and assumptive therefore another opportunity should be given to the assessee to explain the allocation of expenses to Power plant unit before the assessing officer. We have gone through the order of ld CIT(A) and note that there is no any infirmity in the order passed by him. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground of appeal raised by the Revenue is dismissed. Disallowance of various expenses on ad hoc basis - HELD THAT:- AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for adhoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained. Eligible profits u/s. 80IA - HELD THAT:- As relying on M/S GODAWARI POWER ISPAT LTD . [2013 (10) TMI 5 - CHHATTISGARH HIGH COURT] CIT(A) was right in granting part relief to the assessee but was not correct in confirming part addition considering the factum of 2 paise per unit for working out eligible profits u/s. 80IA of the Act. Consequently, the findings of the CIT(A) granting relief to the assessee are confirmed and the addition partly confirmed pertaining to the electricity duty being devoid of merits is directed to be deleted. Allowable revenue expenses - HELD THAT:- If expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. But if it is made for running the business or working it with a view to produce the profits, it is a revenue expenditure. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. In the assessee case the following expenditure are Revenue in nature because these expenses are for running the business or working it with a view to produce the profits Installation of Isolator breakers of improved rating, Installation of two lighting transformers.Therefore, we direct the assessing officer to treat the above mentioned expenses as revenue expenditure.

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• 2020 (7) TMI 369
  Revision u/s 263 - Matter was subject matter of appeal before CIT(A) - Allowability of provision of interest u/s. 234D under provisions of MAT - as per CIT-A provision of interest on income-tax amounting to ₹ 14.44 crores provided for withdrawal of excess refund is income-tax charged under the provisions of the Act and therefore, ought to have been added while computing the book profits under section 115JB - HELD THAT:- in the present case the AO has already analysed one aspect of the matter which was pending before the CIT(A), the matter cannot be again relooked by the ld. CIT, on any other aspect as the order of the AO would merged with the order of CIT(A) in view of the decision of CIT Vs K. Sera Sera Production Ltd [ 2015 (5) TMI 937 - BOMBAY HIGH COURT] . Commissioner had no power to touch upon the issues of disallowance of provision of Income tax in the impugned proceedings under Section 263 of the Act. It is evident from the above that the Commissioner is not empowered to exercise his jurisdiction on an issue which is subject matter of appeal before the CIT(A). In the present case, it is undisputed that the matter on the issues in question is pending before the CIT(A). Thus, we find that the Commissioner has no jurisdiction to consider these issues in revisionary proceedings under Section 263 of the Act in terms of clause (c) to Explanation 1 to Section 263 of the Act. Decided in favour of assessee.

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• 2020 (7) TMI 368
  Unexplained income - addition on account of introduction of the amount in the capital account of the assessee - HELD THAT:- Only contention of the AO in the remand report is that M/s Euro Steels had shown very low income in the assessment year 2013-14 itself is not a ground to reject the creditworthiness of M/s Euro Steels. An assessee, may or may not, earn considerable income during an assessment year but that fact itself is not determinative of the creditworthiness / financial capability of such an assessee. When the assessee and even the AO himself has called for necessary records from his counterpart / AO of the said concern, but could not find any discrepancy or fault in the same, hence, in our view, the action of the AO in rejecting the creditworthiness of M/s Euro Steels solely on the ground that its income for the year under consideration was low, cannot be held to be justified. So far as the identity of the creditor was concerned, there was no doubt raised by the AO in this respect. M/s Euro Steels was as separate concern in which the assessee was partner and the same was duly assessed to the income tax. So far as the genuineness of the transactions was concerned, even in that respect no doubt has been raised by the AO. Admittedly, all the amounts by M/s Euro Steels has been transferred to the assessee through banking channels. CIT(A) has rejected the contentions of the assessee and upheld the additions made by the AO citing different reasons saying that the assessee could not prove the source of numerous deposits in the bank accounts of M/s Euro Steels. CIT(A) simply noted that there was a deposit into the said account, therefore, he doubted the genuineness of the transactions, whereas, the claim of the assessee has that all the details whatever were called for, were duly furnished and that the alleged deposits in the individual bank account of Shri Rohit Kumar Jindal were through banking channels. When the assessee has proved the source of deposit and genuineness of the transactions, therefore, the assessee without being called for to prove the source of source by the AO was not supposed to furnish the further details. No doubt has been raised either by the AO or by the CIT(A) regarding the transaction so far as the receipt by the assessee from saving account of the individual is concerned. So far as the addition was concerned, the assessee admittedly could not prove with reliable evidence the source of the said amount and the creditworthiness of the creditor and genuineness of the transaction. Addition to the extent of ₹ 4,75,000/- is upheld whereas, the remaining part of the additions out of the total additions ₹ 1,03,10,000/- is ordered to be deleted. This ground of the appeal is accordingly partly allowed. Unexplained unsecured loans - HELD THAT:- Since the source of deposit in the bank account of M/s Kiran Industries remained unexplained, he, therefore, held that the genuineness of the transaction is not proved. However, in our view, the fact that there was sufficient income declared by Smt. Santosh Rani to prove her creditworthiness of the amount advanced to M/s Dev Krishan Jindal Sons HUF, is enough evidence so far as the onus on the assessee to prove the creditworthiness of the creditor is concerned. The assessee, in fact, has proved the source of source. The observation of the CIT(A) that there were other entries of the equal amount in the bank account of M/s Kiran Industries, in our view, is not relevant so far as the genuineness of the transaction and creditworthiness of the creditor in respect of the funds received by the assessee is concerned. - Decided in favour of the assessee.

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• 2020 (7) TMI 367
  TP Adjustment - Comparable selection - HELD THAT:- Assessee company is providing customized business process outsourcing services which include voice based inbound phone support, e-mail support, on line chat and back office processing to Tracmail group of companies (Associated Enterprises) - direct the TPO/Assessing Officer to exclude Genesys from the final list of comparables as functionally dissimilar with that of assessee. Exclusion of Excel from the final list of comparables on the ground that the company is having fluctuating margins - A company having super normal profits or highly unstable margins should not be idly considered as good comparable. Thus, in view of the decision of Baxter India [ 2017 (8) TMI 1557 - ITAT DELHI ] we find merit in the contentions of the assessee and direct the Assessing Officer to exclude Excel from the list of comparables. Depreciation on goodwill - HELD THAT:- ln assessee s own case when the assessee by virtue of such amalgamation has received back the goodwill in its book, depreciation has to be allowed on goodwill. As regards the doubt raised by learned DRP that the assessee cannot claim depreciation on the entire amount of goodwill, it must be observed that the assessee has claimed goodwill on the opening WDV only and not on the entire amount. It is now fairly well settled that goodwill being an intangible asset, depreciation has to be allowed. In view of the aforesaid, we direct the Assessing Officer to allow assessee s claim of depreciation on goodwill. Claim of additional depreciation on goodwill subsequent to amalgamation - In the light of decision of the Co-ordinate Bench in assessee s own case on same set of facts, we restore this issue back to the file of Assessing Officer with similar directions Non-granting of set off of brought forward business losses - HELD THAT:- As assessee has prayed for restoration of this issue with a direction to Assessing Officer to allow assessee s claim. The issue is restored back to Assessing Officer for reconsideration in accordance with law. Assessing Officer shall grant reasonable opportunity of hearing to the assessee in accordance with law.

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• 2020 (7) TMI 366
  Undisclosed income on undisclosed investment in sales and profit on undisclosed sales - basis of reason to believe that there was undisclosed sales detected during the course of search operation by the office of Directorate General of Central Excise intelligence - addition u/s 69C - HELD THAT:- Assessee as per his own admission had made the undisclosed sales from undisclosed purchases. In business, there is rotation of purchase and sales. The initial investment in the purchase gets rotated throughout the year in the form of purchase and sales resulting in the total turnover. The initial investment in the undisclosed sales would constitute undisclosed investment in undisclosed sales. The A/R of the assessee during appellate proceedings could not provide any details of this undisclosed investment. Therefore, ld CIT(A) in the absence of any material on record, the entire undisclosed investment in undisclosed sales had been estimated. CIT(A) noticed that assessee`s undisclosed sales as detected during search and seizure operations carried out by the Officers of the Directorate General of Central Excise Intelligence amounts to ₹ 2,76,07,339/- during the assessment year 2010-11. The average sales per month amounts to ₹ 23,00,611/-. The average GP on sales as disclosed in the returns is 3.90% which amounts to ₹ 89,724/-. The average purchase per month amounts to ₹ 22,10,887/-. The undisclosed investment was, therefore, estimated at ₹ 22,10,887/- (₹ 23,00,611/- -89,724/-) on undisclosed sales of ₹ 2,76,07,339/-. CIT(A) also computed the profit on undisclosed sales of ₹ 2,76,07,339/- at the rate of 3.90% at ₹ 10,76,686/- [3.90% of ₹ 2,76,07,339]. Therefore, addition was restricted to ₹ 32,87,573/- (₹ 22,10,887/- plus ₹ 10,76,686/-) instead of ₹ 2,76,07,339/- as undisclosed income on undisclosed investment in sales and profit on undisclosed sales. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A). Appeal of the revenue is dismissed.

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• 2020 (7) TMI 365
  Validity of the reassessment proceedings - eligible reasons to believe - Unexplained income u/s.68 - HELD THAT:- Assessee had turnover of more than ₹ 40 lakhs, but she had not filed the return of income along with the tax audit report. Therefore, the AO was reasonable in believing that there was escapement of income and in issuing the notice u/s 148 of the Act. Contention of the assessee that the CIT(A) had deleted addition for which assessment has been reopened and, therefore, the assessment fails is also not acceptable. AO has made an addition on the very ground on which assessment is reopened, but the said addition has been deleted by the CIT(A). Thus, the decisions cited by the Ld.Counsel for the assessee are not applicable to the case before us. The CIT(A) s acceptance of assessee s contention does not fail the validity of the reassessment proceedings itself. Therefore, the additional grounds of appeal raised by assessee are rejected. Unexplained source of investment - assessee has received funds through banking channels from her brother. Therefore, the identity and genuineness of the transaction is proved. Since the identity and genuineness is proved and the relationship between the donor and donee is also proved, I am convinced that the assessee has been able to explain the sources of investment. The assessee has shown ₹ 1 lakh as her own earnings which is not accepted by the department without any basis find that the assessee being the wife of a Defense Personnel, could not be said to not to have the savings of ₹ 1 Lakh. Therefore, the entire addition of ₹ 13 lakhs is deleted. The grounds of appeal of assessee on this issue are allowed. - Appeal decided partly in favour of assessee.

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• 2020 (7) TMI 364
  Estimation of commission income on accommodation entries - As per revenue assessee is merely an entry provider and has not carried out any genuine transaction, the estimation of commission @ 1% of the total turnover is fair and reasonable and the assessee does not deserve any leniency considering the nature of activity carried on by it - HELD THAT:- It is evident, while the Assessing Officer has charged commission @ 1% on both purchase and sale turnover, learned Commissioner (Appeals) has reduced the rate of commission to 0.15% and that too only on one of the transactions i.e., either purchase or sale. Notably, while deciding identical issue in assessee s own case in assessment year 2010 11, the Tribunal, in the order referred to above, has upheld estimation of commission income @ 1% of the total turnover. However, to be fair to the assessee, the aforesaid decision of the Tribunal was not available before learned Commissioner (Appeals) while deciding the appeals for the impugned assessment years. We set aside the impugned orders of learned Commissioner (Appeals) and restore the issue back to his file for fresh adjudication keeping in view the order passed by the Tribunal in assessee s own case for the assessment year 2010 11, as referred to above. The assessee must be provided a reasonable opportunity of being heard before deciding the issues. Grounds raised are allowed for statistical purposes. Validity of re opening of assessment after inordinate delay of 307 days - Filing of cross objections - HELD THAT:- Perusal of the cross objections filed by the assessee would reveal that the grounds raised therein are purely technical in nature challenging the validity of re opening of assessment under section 147 of the Act as well as rejection of books of account under section 145(3) of the Act. It is evident, before learned Commissioner (Appeals), the assessee had not raised any grounds challenging the validity of re opening of assessment under section 147 of the Act. On a query from the Bench, learned Counsel appearing for the assessee conceded this fact. Thus, the aforesaid factual position clearly establishes that the cross objections have been filed by the assessee raising such technical issue challenging the validity of re opening of assessment after inordinate delay of 307 days is only as an after thought without having any reasonable cause. In view of the aforesaid, we decline to condone the delay in filing the cross objections.

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• Customs

• 2020 (7) TMI 363
  Grant of Regular Bail - seizure of Gold Biscuits - petitioner is in custody for the last 01 year and 08 months and has relied upon various zimni orders passed by the trial Court - HELD THAT:- Considering the facts and circumstances of the case and in view of the fact that main accused has been convicted for a period of three years only and also considering the fact that the petitioner is in custody for the last 01 year and 08 months and the trial is not proceedings further in view of various zimni orders (Annexure A-9 colly.) produced on record, this petition is allowed and the petitioner is directed to be released on regular bail subject to furnishing his bail/surety bonds to the satisfaction of the trial Court/Illaqa Magistrate/Duty Magistrate, concerned. Petition disposed off.

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• 2020 (7) TMI 362
  Rejection of Refund Claim - denial of refund on the ground that the assessment of Bill of Entry has not been challenged by the appellant by filing appeal before appropriate forum - HELD THAT:- The appellant has paid duty under protest. Whenever an assessee pays duty under protest, it indicates a challenge by him on the demand of duty made by the department. Therefore it is for the department to pass appropriate assessment order considering the protest made by the assessee. In the present case, the decision of the Hon'ble Supreme Court in the case of ITC LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA -IV [ 2019 (9) TMI 802 - SUPREME COURT] would not apply. The impugned order is set aside and the appeal is allowed by way of remand to the adjudicating authority who shall consider the refund claim on merits and pass orders - Appeal allowed by way of remand.

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• Insolvency & Bankruptcy

• 2020 (7) TMI 361
  Conduct of inspection of Mr. Koteswara Rao Karuchola (IP) - Allegation that the IP had contravened provisions of the Code, Regulations, and directions issued thereunder - HELD THAT:- An IRP or RP is appointed by the AA. He is an officer of the Court and he is duty bound to conduct CIRP with fairness and diligence and must maintain absolute independence in discharge of his statutory duties without any external influences. The entire resolution process of a Corporate Debtor is dependent on the IRP/RP who is primarily responsible for efficiently and effectively steer it towards resolution. It is due to this reason that the role of the IRP/RP becomes paramount during CIRP. Further, it is the duty of the IP to follow the guidelines laid down under the Code and the Regulations made thereunder so as to legitimately meet the interests of all stakeholder - The UNCITRAL Legislative Guide on Insolvency Law as well as the BLRC, the recommendations of which has led to the enactment of the Code, has also laid emphasis on the role of an IP and has identified the role of the IP as central to the entire process as well as one which is of the pillar on which the CIRP exists. Corporate Debtor undergoing CIRP is a representation of interests of several stakeholders who pin their hopes on the outcome of CIRP. During CIRP, it is the utmost responsibility of an IP to run the company of Corporate Debtor as a going concern and conduct the entire CIRP in a transparent manner without creating additional insolvency resolution process costs - the DC, in exercise of the powers conferred under section 220 (2) of the Code read with sub-regulations (7) and (8) of Regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, issues the following directions: (1) The DC hereby imposes on Mr. Koteswara Rao Karuchola, a monetary penalty of ₹ 1,00,000/- (Rs. One Lakh only) and directs him to deposit the penalty amount by a crossed demand draft payable in favour of the 'Insolvency and Bankruptcy Board of India'. The Board in turn shall deposit the penalty amount in the Consolidated Fund of India. (2) Mr. Koteswara Rao Karuchola shall not accept any new assignment as an IP till he deposits the monetary penalty of ₹ 1,00,000/- with the Board and produces evidence to the Board of such deposit. (3) This Order shall come into force on expiry of 30 days from the date of its issue.

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• 2020 (7) TMI 360
  Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT:- On perusal of the definition it is clear that person must fall on the above category(s). In the case on hand, the petition is filed in the name of M/s. S. Crane Engineering Works, a proprietary concern as operational creditor, who is not a person for the purpose of filing the application u/s. 9 of the I B Code. Hence, on this ground itself the application is not maintainable - It is also the duty of the Adjudicating Authority to dispose of cases jus dicers , in accordance with law as it is and not jus dare in accordance with law as it should be. Also, the respondent has also raised some objections with regard to the amount of debt relating to one invoice. The application, so filed by the applicant is not maintainable and is bad in law as well as in facts.

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• 2020 (7) TMI 359
  Liquidation of the Corporate Debtor - seeking to remove goods lying in Customs Bonded Warehouse without any condition, demur and/or payment of Customs Duty - Waterfall Mechanism of section 53 of the Insolvency and Bankruptcy Code, 2016 - CBEC Circular No. 1053/02/2017-CX dated March 10, 2017 - HELD THAT:- Both the Acts, Insolvency and Bankruptcy Code, 2016 as well as Central Excise Act, on the subject, as both the statutes are having status of special law and contains non obstante clause under section 142A of the Customs Act, 1962, as well as section IIE of the Central Excise Act, 1994, and, thus, having priority for distribution of proceeds including the liquidation of assets. Hon'ble Supreme Court came to an occasion to examine similar legal position in its landmark decision in SOLIDAIRE INDIA LTD. VERSUS FAIRGROWTH FINANCIAL SERVICES LTD. [ 2001 (2) TMI 968 - SUPREME COURT] and MARUTI UDYOG LTD. VERSUS RAM LAL ORS. [ 2005 (1) TMI 671 - SUPREME COURT] wherein Their Lordships have pleased to observe and rule that if there are two special statues, which contain non obstante provisions, the later statute must prevail. Therefore, by virtue of section 238 of the Code being the later statute, the Applicant submits that section 238 of the Insolvency and Bankruptcy Code, 2016, being a subsequent law, the proceedings contained therein shall have overriding effect on the other proceedings of Custom Act and Central Excise Act. Therefore, by following the above stated ruling, in our humble view, the provisions of section 53 described about the Insolvency and Bankruptcy Code, which provides manner for priority to be given for making distribution of proceedings from sale of liquidation assets shall prevail over the provisions of section 11(e) of the Central Excise Act and other provisions of Customs Act. Hence, the Respondents' Department cannot legally withhold the releasing of the material/goods, which the property of the Corporate Debtor company (in liquidation) as pre-requisite condition for making the Customs duty by the Liquidator of Corporate Debtor company (in liquidation), because the claims of the respondents' departments have to be treated as Government dues and needs to be dealt with under the Waterfall Mechanism of section 53 of Insolvency and Bankruptcy Code. By placing reliance on the judicial precedents read with the clarificatory circular issued dated 10-3-2017 (Subject: Master Circular on Show Cause Notice, Adjudication and Recovery-reg.) which states that the dues of the Income-tax Department have priority after the dues, if any, under the provisions of the Companies Act, Recovery of Debt due to Banks and Financial Institutions Act, 1993 and Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and Insolvency and Bankruptcy Code, 2016. Respondents are directed to allow the applicant-liquidator to remove the Material, which is lying in the Customs Bonded Warehouses without any condition, demur and/or payment of Customs Duty - Application allowed..

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• 2020 (7) TMI 358
  Settlement of all dues - Approval of Resolution Plan - CIRP process - time period of 180 days - Section 17 of the Insolvency and Bankruptcy Code 2016 - HELD THAT:- All the dues of the applicant/appellant has been settled as one time settlement and paid in full. These three appeals listed before us today have become redundant - the appeals filed by the appellants are dismissed as infructuous.

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• Service Tax

• 2020 (7) TMI 357
  Principles of Natural Justice - CENVAT Credit wrongly availed - prayer made in the application is that the applicant may be permitted to add certain grounds as also file related documents and to grant an opportunity to the applicant to urge the said grounds at the time of hearing of the appeal - extended period of limitation - interest and penalties - scope of Rule 10 of the 1982 Rules - HELD THAT:- If the appellant has not taken a ground, he cannot be permitted to urge or be heard in support of the ground not taken unless leave is granted by the Tribunal. The Supreme Court in JUTE CORPORATION OF INDIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND ANOTHER [ 1990 (9) TMI 6 - SUPREME COURT] examined the powers of Appellate Assistant Commissioner under section 251 of the Income Tax Act. After noticing that the Appellate Assistant Commissioner, while hearing an appeal against the order of assessment has the power to confirm, reduce, enhance or annual the assessment, the Supreme Court noticed that the Appellate Assistant Commissioner has further been empowered to remit the case to the Assessing officer for making a fresh assessment. Thus, the Supreme Court observed that the Appellate Assistant Commissioner is entrusted with wide powers. It is in this context, that the Supreme Court examined whether the Appellate Assistant Commissioner had jurisdiction to permit raising of additional grounds for assailing the order of the assessment. The Supreme Court observed that there is no reason as to why the appellate authority cannot modify the assessment order on an additional ground not taken before the Income Tax Officer in the absence of any provision in the Act placing restrictions on the powers of the Appellate Authority in entertaining additional grounds - There is no difficulty in permitting the appellant to urge additional legal grounds relating to exemption notification and vagueness of the show cause notice. So far as the limitation is concerned, a ground had already been taken in the memorandum of appeal and additional grounds are sought to be added to substantiate the main ground. Thus, this additional ground can also be permitted to be urged. Whether the Tribunal should permit the appellant to adduce documents/evidence in support of its plea that the activity carried out by the appellant would fall under the category of works contract , which was not leviable to service tax before 01 June, 2007? - HELD THAT:- It is a fact that there were conflicting decisions, even of Larger Benches, as to whether the activity of the nature contemplated under works contract would be leviable to service tax prior to 01 June, 2007 and it is only in the year 2015 that the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] determined that it would not be leviable to service tax prior to 01 June, 2007 - It would, therefore, be appropriate to permit the appellant to raise this issue by way of additional ground and also permit the appellant to produce document / evidence in support thereof, more particularly when there is no restriction in law and indeed none has been pointed out, in raising this plea at this stage. Thus, leave can be granted to the appellant to raise an additional ground on the issue relating to works contract and also to permit the appellant to produce the evidence / documents in support of this plea - the appellant is granted leave to raise additional grounds in the application in regard to the issues discussed above and also to produce evidence/ documents in support of the plea relating to works contract . Application allowed.

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• 2020 (7) TMI 356
  Franchise Service - agreement with the Government of Andhra Pradesh according to which they had to construct a bridge across Gowtami branch of river Godavari between Yanam Yedurulanka (Y-Y Bridge) on Build-Operate-Transfer (BOT) basis - whether exempt from service tax under works contract? - Time Limitation - HELD THAT:- The appellant was to provide services to the consumers in the form of maintaining the bridge and allowing its use for which they were entitled to collect remuneration in the form of toll fee. The toll fee, evidently was to be collected in the name of the appellant because they were entitled to collect it as per the agreement with the Government of Andhra Pradesh. This was the business model of the appellant as far as this project is concerned. The appellant had given this right to GTBPL who was rendering all the services which the appellant was required to render and was collecting fees which the appellant was entitled to collect. The receipts were also issued in the name of the appellant themselves. This changed only when the investigations had begun. Until these investigations had begun, every user of that bridge was given the impression that the appellant was rendering service and he was paying a fee for it - as far as both the Government of Andhra Pradesh and the users are concerned, the service which GTBPL was rendering was being rendered by the appellant and the fee which they were collecting was being collected by the appellant. This is akin to McDonald s restaurant being run in a town by a franchisee. The consumer sees it as McDonald s restaurant although it is actually being operated by the franchisee - the appellant has provided franchisee service to GTBPL and had collected an amount towards it. What is important is that the amount must be paid and that amount must be a consideration for the service rendered. In this case both the franchisee taking over the liability of debt of the franchisor and paying an amount by way of shares has been quantified in terms of money and that is how the SCN has computed the demand. There is no doubt that the entire amount has been paid only for consideration of this service. There is no other arrangement in this case. Therefore, the case is against the appellant on merits. Time Limitation - penalty - HELD THAT:- Linitation can be invoked if there is fraud or collusion or wilful misstatement or suppression of facts or violation of Act or Rules with intent to evade payment of service tax - In this case, nothing was disclosed to the Revenue by the appellant either in their ST3 returns or by way of letters or intimation to the department. In fact, the agreement was entered into privately between the appellant and the franchisee GTBPL through Board resolutions - there are sufficient grounds to invoke extended period of limitation in this case - penalty u/s 78 is also invoked. The appeal is remanded to the original authority for the limited purpose of computation of the service tax taking the amounts received as cum-tax values and corresponding changes in the interest and amount of penalty - appeal allowed by way of remand.

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• Central Excise

• 2020 (7) TMI 355
  Clandestine manufacture or removal - MS ingots and TMT Bars, flats, challans etc. - shortage of goods - correctness of reliability upon third party evidence - HELD THAT:- Since the sole challenge to the order is its reliance upon third party evidence, it is necessary to check the evidentiary value of the third party evidence - Reliance to be placed in the case of BAJRANGBALI INGOTS STEEL PVT. LTD., SURESH AGARWAL VERSUS CCE, RAIPUR [ 2019 (1) TMI 966 - CESTAT NEW DELHI] where it was held that the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods. There is no other evidence or document in the form of stock verification of the raw-material of the appellant and the material supplied to M/s. PIL nor any evidence about usage of any transportation by the appellants for transporting the alleged quantity of raw-material to M/s.PIL. In absence thereof the documents recovered from M/s.PIL cannot be held against the appellant. It is well settled law that there has to be some concrete evidence which would show clandestine manufacture of goods, as was reiterated by Tribunal, Delhi in the case of C.C.E. S.T. -RAIPUR VERSUS P.D. INDUSTRIES PVT. LTD. [ 2015 (11) TMI 455 - CESTAT NEW DELHI] . The order confirming the recovery has no legal basis to sustain - Appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2020 (7) TMI 354
  Smuggling - Drug Trafficking - Heroin - Contraband Item - illegality while drawing samples from the seized substance - whether the procedure specified under the Standing Orders can be flouted? - HELD THAT:- A combined reading of paras of the Standing Orders would show that where more than one container/package is found, the respondent is required to draw a sample from each of the individual container/package and test each of the sample with the field testing kit . It is further provided that if the container/packages are identical in shape, size and weight then lots of 10 or 40 containers/packages may be prepared and thereafter representative samples from each container/package in a particular lot are to be drawn, mixed and sent for testing - Mixing of the contents of container/package (in one lot) and then drawing the representative samples is not permissible under the Standing Orders and rightly so since such a sample would cease to be a representative sample of the corresponding container/package. In the present case, four packets containing suspicious powdery substance were found concealed in a stroller bag . On testing with the field testing kit , the powder in each packet tested positive for heroin. The I.O., without weighing the contents of each individual packet, mixed the powder from all the 4 packets in one polythene bag and then drew the sample from the mixture - In the opinion of this court, the procedure adopted by the respondent in the present case for drawing samples neither conforms to the procedure prescribed under Section 52A of NDPS Act nor under the Standing Orders - At the cost of repetition, the respondent neither filed any application before the Magistrate for drawing the samples under his supervision nor followed the procedure of drawing a representative sample outlined in paras 2.4 or 2.5 read with 2.8 of the Standing Order 1/89. This court is of the view that the samples sent to the CRCL were not the representative samples. Besides, by mixing the contents of all the 4 packets before drawing any sample not only the sanctity of the case property in the individual packet was lost but also the evidence as to how much each individual packet weighed - the prosecution has failed to prove its case against the appellant beyond reasonable doubt. Consecutively, the appeal succeeds and the appellant is acquitted. His bail bonds are cancelled.

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